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Is legacy charitable giving increasing?

Recent figures from UK Fundraising show that only 7% of the population leave a legacy to a charity in their Will, despite 35% saying they would consider doing so, and that it is actually younger people who are more likely to leave something than the older generations.

There are many reasons that could be attributed for this and one is likely to be that the older generations feel that they need to help their children and family members before they can help a charity. This has been made harder because the nil rate band has failed to keep pace with rapidly increasing house prices (in the South East and London particularly) and HMRC actually collected more in Inheritance Tax last year than any previous year.

Another contributing factor could be that more individuals and families are involved in philanthropic activities during their lifetimes, donating time as well as money to help their chosen good cause.

However, as solicitors, we are still regularly asked to include a charity legacy in a Will and when doing so, it is always worth considering how to make this gift, particularly as legacies passing to UK charities are exempt from inheritance tax.

Legacy types

The most popular legacy included in a Will is a fixed pecuniary legacy of an amount chosen by the donor. This amount is paid, regardless of the size of that person's estate on death, provided there are sufficient funds.

However, if you are leaving a large amount or several charitable legacies to a UK registered charity or amateur sports club; it might be worth considering using a percentage instead.

This can also convey an advantage to the other people benefiting under your will if you choose to leave 10% or more of the general component of your estate to charitable causes because the taxable beneficiaries receive their legacies subject to a reduced rate of 36%, compared to the normal 40%.

The charity could also be your residuary beneficiary meaning that they inherit your estate after the payment of specific gifts, debts, funeral expenses and inheritance tax.

Pitfalls to avoid

The wording of the clause leaving your legacy to charity should also be carefully considered to make sure your support ends up where you had intended.

For example, it is little known that local Age UK charities are actually independent charities in their own right, not one large national charity. They work with the Age UK group to benefit from the national promotions and branding but the objectives of the local charity will be tailored to the needs of that geographical area. So, if you intend to benefit your local group, the legacy needs to be left to that charity, not Age UK generally.

You might also want your legacy to be used for a certain project run by the charity or towards a particular objective conveyed by the charity. We have heard of charities being left lots of benches for their gardens, when actually the charity needs cash for a vital project. It is therefore a good idea to get in contact with the charity to ask if they have any preferred wording you use in your Will before you visit the solicitor. Read more about how legacies can be left 'open' to a charities choice in our recent blog.

Finally, following the high profile case of Illot v The Blue Cross and Others, it has been proven that charities are not afraid to litigate where there is ambiguity or a potential claim against your estate, often incurring high legal costs.

Of course, no one wants a charity to have to use its funds for anything other than its charitable purposes so if you are intending to leave a gift to charity, we can provide you with proper advice on all of the issues that you will need to consider carefully before making your Will.

For further information on leaving a charitable legacy in your Will, please contact Laura Harper or another member of the Blake Morgan Succession and Tax team.

Blake Morgan is supporting Remember A Charity Week, which runs from 11-17 September 2017.

About the Author

Laura advises on a range of private client issues specialising in tax and succession planning for individuals and families based in the UK and with foreign assets.

Blake Morgan LLP (registered number OC392078) is a limited liability partnership registered in England and Wales with its registered office at Harbour Court, Compass Road, North Harbour, Portsmouth PO6 4ST. It is authorised and regulated by the Solicitors Regulation Authority. A full list of its members is available at all of its offices. The term "partner" is used to mean a member of the firm or employee who is a lawyer with equivalent standing and qualifications.